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First and foremost, we would like to thank God for his grace, mercy and
gift of life. We would also like to thank our supervisor Anders Hederstierna
for his patience suggestions and advice through out the project. Our
gratitude also goes to Micael Larsen of ISS for his time during the
interview and sending us some of the resource materials that we used.
We would also like to send our gratitude to our lovely wives, Diane
Amanze and Sondengam Delphine, our respective families (the Amanze
and Sondengham families) for their moral support and our friends and those
who made my (Collins Amanze) stay in Sweden a wonderful experience.
February, 2008
Collins Amanze and Sondengam B.K.A
ii
Executive Summary
iii
2. What strategies (if any) are relevant for the possible growth of an
integrated facility services company?
iv
Table of content
ACKNOWLEDGEMENTS..........................................................................................II
EXECUTIVE SUMMARY ......................................................................................... III
TABLE OF CONTENT................................................................................................ V
FIGURES AND TABLES........................................................................................... VI
1 INTRODUCTION ................................................................................................1
1.1 BACKGROUND................................................................................................1
1.2 PURPOSE ........................................................................................................3
1.3 SCOPE ............................................................................................................3
1.4 RESEARCH FOCUS ..........................................................................................3
1.5 RESEARCH QUESTION .....................................................................................4
1.6 WHY ISS, SWEDEN?.......................................................................................4
2 METHOD .............................................................................................................6
2.1 DATA COLLECTION ........................................................................................6
2.1.1 Primary data.............................................................................................6
2.1.2 Secondary data .........................................................................................6
2.1.3 Interview...................................................................................................7
2.2 PROBLEMS AND LIMITATIONS .........................................................................7
3 LITERATURE REVIEW.....................................................................................8
3.1 WHAT IS A STRATEGY? ..................................................................................8
3.1.1 The Hierarchies of Strategy.....................................................................10
3.2 MARKETING STRATEGY................................................................................11
3.4 WHAT IS STRATEGIC MARKETING PLAN? ......................................................19
3.5 MARKETING STRATEGIES FOR SERVICE FIRMS...............................................20
3.5.1 Managing Differentiation........................................................................23
3.5.2 Managing Service Quality.......................................................................26
3.5.2.1 Criteria That Reflect Service Quality......................................................... 28
3.5.3 Managing Productivity............................................................................32
4 ISS STRATEGY .................................................................................................35
4.1 ANALYSIS OF ISS STRATEGIES......................................................................42
4.2 CORPORATE SOCIAL RESPONSIBILITY ...........................................................46
5 CONCLUSION AND RECOMMENDATIONS ................................................49
5.1 CONCLUSION ..............................................................................................49
REFERENCES ............................................................................................................52
APPENDIX A ..............................................................................................................54
APPENDIX B...............................................................................................................57
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Figures and tables
FIGURE 1.1 ISS ORGANIZATION .................................................................. 2
FIGURE 3.1 STRATEGY AS AN INTEGRAL PART OF BUSINESS SUCCESS............ 9
FIGURE 3.2 THREE GENERIC STRATEGIES .................................................. 18
FIGURE 4.1 ISS STRATEGY ........................................................................ 37
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1 Introduction
1.1 Background
Many service companies in the world engage in providing more than one
service to its customers. The companies identify gaps, which must be filled
in order to meet customers’ needs and they endeavour to fill these gaps by
offering a range of services to them. They identify weakness in the market
segment that are emerging, neglected or poorly served by competitors after
which they select a strategy using the marketing mix as a resource. Any
organization that wants to be successful in doing business needs to
concentrate its resources on the greatest opportunities to increase sales and
achieve a sustainable competitive advantage. This is true of service
companies. Marketing strategy therefore, is a long-term response to the
changing environment and involves fundamental decisions about how to
match resources to that changing environment.
1
of the world’s largest Facility Service providers. It aspires to lead facility
services globally. With its head office in Copenhagen, Denmark, It has
market presence in 50 countries of the world i.e. in Europe, Asia, South
America, Oceania (Australia and New Zealand) and recently in North
America (The United States of America). The company has expanded
substantially through organic growth and acquisitions. It has more than
410,000 employees and more than 100,000 business-to-business customers
[1]. ISS continues to transform itself towards becoming an Integrated
Facility Services (IFS) company by offering a wide range of services within
the five pillars of: cleaning, office support services, property services,
catering and security. Each of these five pillars contains a number of
special services. The five types of services are integrated into a facility
services offering, where ISS offers a management solution that exploits the
synergy potential, and as a result provides the customer with a better
solution at a competitive price. [2]
2
FS Funding A/S (previously PurusCo A/S) ultimately owned by EQT and
Goldmann Sachs Capital Partners is the owner and single shareholder of
ISS A/S. Decisions regarding the ISS Group's strategy and financing are the
responsibility of FS Funding A/S and its two subsidiaries ISS A/S and ISS
Global A/S. The Board of Directors and the Executive Management of FS
Funding A/S, ISS A/S and ISS Global A/S are identical. [1]
1.2 Purpose
1.3 Scope
We recognize that there are many facility service solutions for example
engineering services, IT consulting, installation and project management,
energy supply and management and lots more. Also, as it is not possible to
3
cover all service sectors in this research emphasis will be on studying the
integrated facility services providers with non-core activities like janitorial
service, property service etc.
The aim of this study is to look into the marketing strategy of a company
that offers a variety of facility services, to analyze how effective those
strategies are vis á vis the company’s corporate strategies. However, the
choice to focus on ISS is due to the following reasons:
4
Location of the company: Having a local facility service provider
(ISS, Sweden) in Sweden naturally attracted us to the company.
This afforded us the opportunity to physically meet with and
conduct interview with the contact person in the company in
Stockholm. This means that we have first hand information instead
of only what we could find through other literature or secondary
sources.
5
2 Method
In this chapter we describe the methods used in our thesis. The chapter will
describe the procedure use in getting an answer to our purpose, and the
various ways we collected data. Problems and limitations of types of data
used during our work will also be discussed in this chapter.
Secondary data use in this study is Internet search, information and data
were collected from various websites to helps us understand and analyze
ISS marketing strategies and therefore answer the research questions. Other
6
secondary data sources that were utilized are literature review from the
company brochure and textbooks.
2.1.3 Interview
Contact was established with personnel of ISS and interview was done to
identify the current practice of the company and also ascertain its marketing
strategies.
7
3 Literature review
3.1 What Is a Strategy?
There are different definitions of strategy. However, for the purpose of this
study, we must select a definition. According to Tony Proctor, a strategy is
a plan that integrates an organization’s major goals, policies, decisions and
sequences of action into a cohesive whole. It can be applied at all levels in
an organization and pertain to any of the functional areas of management.
Thus there may be production, financial, marketing, personnel and
corporate strategies, just to name a few. In marketing, there may be pricing,
product, promotion, distribution, marketing research, sales, advertising,
merchandising, etc. strategies. Strategy is concerned with effectiveness
rather than efficiency and is the process of analysing the environment and
designing the fit between the organization, its resources and objectives and
the environment. [4]
Michael Porter states that strategy is about the means or ways (steps) of
attaining goals and not their specification. He also indicates that strategy is
one element in a four-part structure. According to Porter, those four part
structures are: (a) what are the goals to be attained? (b) How will the
resources be deployed? (c) The tactics; i.e. the ways in which resources that
have been deployed are actually used or employed and (d) are the resources
(means) themselves available and at our disposal? Both strategy and tactics
bridge the gap between goals and means. In business, as in the military,
strategy bridges the gap between policy and tactics. It is the creation of a
unique and valuable position, involving a different set of activities.
Meaning strategy is about competitive position, about differentiating
8
yourself in the eyes of the customer, about adding value through a mix of
activities different from those used by competitors. [5]
T A C T I CS
Figure 3.1 Strategy as an integral part of business success [7]
9
3.1.1 The Hierarchies of Strategy
Corporate strategy: Strategy at this level attempts to bring together all the
business lines of a company and point them toward an overall goal. It is
mainly concerned with defining the set of businesses that should form the
company’s overall profile. [6]
Each functional area of a business (e.g. marketing) makes its own unique
10
contribution to strategy formulation at different levels. In many firms, the
marketing function represents the greatest degree of contact with the
external environment, the environment least controllable by the firm. In
such firms, marketing plays a pivotal role in strategy development. In its
strategic role, marketing consists of establishing a match between the firm
and its environment. It seeks solutions to problems of deciding (a) what
business the firm is in and what kinds of business it may enter in the future
and (b) how the chosen field(s) of endeavor may be successfully run in a
competitive environment by pursuing product, price, promotion, and
distribution perspectives to serve target markets. In the context of strategy
formulation, marketing has two dimensions: present and future. The present
dimension deals with the existing relationships of the firm to its
environments. The future dimension encompasses intended future
relationships (in the form of a set of objectives) and the action programs
necessary to reach those objectives. [6]
11
on serving them. It designs a marketing mix using mechanisms under its
control: product, price, place and promotion. It also engages in marketing
analysis, planning, implementation and control in order to find the best
marketing mix and to take action. The company uses these activities to
enable it to watch and adapt to the marketing environment. [9]
12
1. Where to compete; that is, it requires a definition of the market (for
example, competing across an entire market or in one or more segments).
2. How to compete; that is, it requires a means for competing (for example,
introducing a new product to meet a customer’s need or establishing a new
position for an existing product).
3. When to compete; that is, it requires timing of market entry (for example,
being first in the market or waiting until primary demand is established).
13
and differentiation focus. [10]
14
returns. The strategic logic of cost leadership usually requires that a firm be
the cost leader and not one of several firms trying to be in that position.
Many firms have made serious errors by failing to recognize this. When
there is more than one aspiring cost leader, rivalry among them is usually
fierce because every point of market share is viewed as crucial. Unless one
firm can gain cost leader and “persuade” others to abandon their strategies,
the consequences for profitability (and long run industry structure) can be
disastrous. Thus cost leadership is a strategy particularly dependent on
preemption, unless major technical change allows a firm to radically
change its cost position. [10]
15
not affect differentiation.
Focus: The third generic strategy is focus. This strategy is quite different
from the others because a firm chooses a narrow competitive segment in the
industry and fits its strategy to serving them to the exclusion of others. By
optimizing its strategy for the target segment, the focuser seeks to achieve a
competitive advantage it its target segments even though it does not possess
an overall competitive advantage. The focus strategy has two variants; the
cost focus and differentiation focus. In cost focus a firm endeavours to
achieve cost adavantage in its target segment while in differentiation focus,
it seeks differentiation in its target segment. Both variants of the focus
strategy rest on differences between a focuser’s target segment and other
segments in the industry. The target segment must either have buyers with
unusual need or the production and delivery system that best serve the
target market must be different from that of other industry segment. Cost
focus exploits differences in cost behaviour in some segment, while
differentiation focus exploits the special needs of buyers in certain
segments. Such differences imply that the segments are poorly served by
broadly targeted competitors who serve them at the same time as they serve
others. The focuser can thus achieve competitive advantage by dedicating
16
itself to the segment exclusively. Breadth of target is clearly a matter of
degree, but the essence of focus is the exploitation of a narrow target
differences from the balance of the industry. Narrow focus in and of itself is
not sufficient for above average performance. [10]
Stuck in the middle: A firm that carries out each generic strategy but does
not achieve any of them can be said to be “Stuck in the middle”. It has no
competitive advantage. This strategic position is usually a recipe for below
17
average performance. A firm that is struck in the middle will compete at a
disadvantage because the cost leader, differentiators, or focuser will be
better positioned to compete in any segment. If a firm that it stuck in the
middle is lucky enough to discover a profitable product or buyer,
competitors with a sustainable competitive advantage will quickly eliminate
the spoil. In most industries, quite a few competitors are stuck in the
middle. A firm that is stuck in the middle will earn attractive profits only if
the structure of its industry is highly favourable, or if the firm is fortunate
enough to have competitors that are also stuck in the middle. Usually,
however, such a firm will be much less profitable than rivals achieving one
of the generic strategies. Industry maturity tends to widen the performance
differences between firms with a generic strategy and those that are stuck in
the middle because it exposes ill-conceived strategies that have been carried
along by rapid growth. [10]
Competitive Advantage
Lower cost Differentiation
1. Cost Leadership 2. Differentiation
Broad
Target
Competitive
Scope
3. A Cost focus 3B. Differentiation
Narrow Focus
Target
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Table 3.1 Risk of the generic strategies [9]
RISKS OF COST RISKS OF RISKS OF FOCUS
LEADERSHIP DIFFERENTIATION
Cost leadership is not Cost leadership is not The focus strategy is imitated
Sustained Sustained The target segment becomes
• competitors imitate • Competitors imitate structurally unattractive
• technology changes • bases for differentiation • structure erodes
• other bases for cost become less important to • demand disappears
Leadership erode buyers Broadly targeted competitors
Proximity in differentiation is Cost proximity is lost overwhelm the segment
lost • the segment’s differences
from other segments
narrows
• the advantages of a broad
line increase
Cost focuser achieve even Differentiation focuser New focuser sub-segment the
lower cost in segment achieve even greater industry
differentiation in segments
19
current situation; identify the needs, problems, and opportunities facing the
company (from the marketing perspective); define the marketing goals and
objectives; and then develop marketing strategies to meet those goals. It is
for a period that extends beyond the next fiscal year and usually covers
three to five years. Although the strategic marketing plan covers all levels
of marketing management, it primarily deals with the strategic corporate
and business unit levels and establishes how the business of marketing will
be conducted in a specific marketing situation. It does this by defining
operational policies, practices, and procedures. The strategic marketing
Plan is also highly financially oriented in regard to a company’s
products/services and marketing efforts. [12]
Until recently, service firms lagged behind manufacturing firms in their use
of marketing. Service businesses are more difficult to manage when using
only traditional marketing approaches. In a product business, mass-
produced products are fairly standardized and sit on shelves waiting for
customers. But in a service business, the customer and frontline service
employee interact to create the service. Thus service providers must work
to interact effectively with customers to create superior value during service
encounters. Effective interaction, in turn, depends on the skills of frontline
service staff, and on the service production and support processes backing
these employees. [9]
20
employees and customers. They understand the service-profit chain, which
links service firms' profits with employee and customer satisfaction. This
chain consists of five links:" [9]
Thus reaching service profits and growth goals begins with taking care of
those who take care of customers. All of this suggests that service
marketing requires more than just traditional external marketing using the
four Ps. Service marketing also requires both internal marketing and
interactive marketing.
21
Internal marketing means that the service firm must invest heavily in
employee quality and performance. It must effectively train and motivate
its customer-contact employees and all the supporting service people to
work as a team to provide customer satisfaction. For the firm to deliver
consistently high service quality, everyone must practice a customer
orientation. It is not enough to have a marketing department doing
traditional marketing while the rest of the company goes its own way.
Marketers must also encourage everyone else in the organization to practice
marketing. In fact, internal marketing must precede external marketing. It
makes little sense to advertise excellent service before the company's staff
is ready, willing and able to provide it. Interactive marketing means that
perceived service quality depends heavily on the quality of the buyer-seller
interaction. In product marketing, product quality often depends little on
how the product is obtained. But in services marketing, especially in high-
contact and professional services, service quality depends on both the
service deliverer and the quality of the delivery. Effective service deliverer-
customer interaction is important for achieving a satisfactory service
transaction. The customer judges service quality not just on technical
quality (e.g. the success of the surgery, the tastiness of the food served in
the restaurant), but also on its functioned quality (e.g. whether the doctor
showed concern and inspired confidence, whether the waiter was friendly
and polite).
Also, each interaction is a 'moment of truth' for the provider, where not just
the service encounter, but also the organization, will be decisively judged
by the customer. Thus, professionals cannot assume that they will satisfy
the client simply by providing good technical service. They have to master
22
interactive marketing skills or functions as well. Effective buyer-seller
interaction may help to secure a satisfied customer.
However, to retain customers over the long term, many service providers
have to develop wide relationship marketing skills for managing customer
relationships.
23
develop a differentiated offer, delivery and image. The offer can include
innovative features that set one company's offer apart from its competitors'
offers. For example, airlines such as Virgin Atlantic have introduced such
innovations as in-flight movies; advance seating, air-to ground telephone
service and frequent-flyer awareness programmes to differentiate their
offers. British Airways even offers international business and first-class
travellers a sleeping compartment, hot showers and cooked-to-order
breakfasts. Unfortunately, this exposes a second problem - service
innovations cannot be patented and are easily copied. Still, the service
company that innovates regularly will usually gain a succession of
temporary advantages and an innovative reputation that may help it keep
customers who want to go with the best. Third, the variability of services
suggests that standardization and quality are difficult to control.
Consistency in quality is generally hard to obtain, but firms that persistently
cultivate a customer orientation and execute sound internal marketing
schemes will increase their ability to differentiate their brand by offering
superior-quality service delivery. The service company can differentiate its
service delivery in three ways: through people, physical environment and
process. These are often referred to as the additional three Ps in service
marketing. The company can distinguish itself by having more able and
reliable customer-con tact people than its competitors have. The enthusiasm
and smart appearance of front-line customer-contact staff also helps. More
importantly, as mentioned earlier, the service business that emphasizes an
internal marketing approach, combined with customer-focused staff
training and education, can succeed in improving employee quality and
performance that will sustain superiority in service delivery. Ultimately, it
is the support and participation of front-line staff and all the people
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involved in the operational processes that is vital to the success of service
production and delivery, and, therefore, the customer relationship and the
organization's success.
The firm can develop a superior physical environment in which the service
product is delivered. Hotels and restaurants, for example, will pay a great
deal of attention to interior decor and ambience to project a superior service
to target customers. Some retailers, such as The Body Shop and Harrods,
have effectively managed the physical environment, giving very distinctive
identities to their outlets. Or it can design a superior delivery process. For
example, a bank might offer its customers home banking as a better way to
use banking services than by having to drive, park and wait in line. Direct
Line, the; British insurance company, pioneered telephone selling of motor
insurance, and succeeded in overtaking traditional providers in the industry.
Finally, service intangibility and variability mean that a consistent sendee
brand image is not easily built. Brand image also takes time to develop and
cannot be copied by competitors. Service companies that work on
distinguishing their service by creating unique and powerful images,
through symbols or branding will gain a lasting advantage over competitors
with lack-lustre images. For example, The Kitz, Sheraton, Hard Rock Cafe,
British Airways, Citibank, Swissair and Benetton all enjoy superior brand
positioning which has taken years of effort to develop. Organizations such
as Lloyd's Bank (which adopted the black horse as its symbol of strength),
McDonald's (personified by its Ronald McDonald clown) and the
International Red Cross have all differentiated their images through
symbols. [9]
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3.5.2 Managing Service Quality
One of the principal ways in which a service firm can differentiate itself is
by delivering consistently higher quality than its competitors. Like
manufacturers before them, many service industries have now joined the
total quality management revolution. Recent years have seen the rapid
adoption of service quality standards and awards such as the
BS5750/ISO9000 international standard, the Malcolm Raldridge National
Quality Award in the USA, the European Foundation for Quality
Management Award and similar schemes in other countries. In
Scandinavian countries, and particularly Sweden, service quality
management has become a topic of national concern, with the government
taking a lead role through initiatives such as the Swedish Customer
Satisfaction Barometer. Many service companies are finding that
outstanding quality can give them a potent competitive advantage that leads
to superior sales and profit performance. True, offering greater service
quality results in higher costs. However, investments usually pay off
because greater customer satisfaction leads to increased customer retention
and sales. [9]
26
on to its customers by consistently delivering value to them. Thus, where
the manufacturer's quality target might be 'zero defects', the service
provider's goal is “zero customer defections”. [9]
27
quality (that is, the key criteria customers use to judge quality); what target
customers' expectations are; and how customers rate the firm's service in
relation to these criteria against what they expected. [9]
28
and performance. The reputation and credibility of the service provider and
customers' perceived risk arc interrelated. If the consumer trusts the service
provider, he or she expects that the service is free from danger or perceives
little risk in using the service. Credibility can be improved through effective
communication of service quality through advertising find/or satisfied
customers. Access can be improved by having multisite locations (e.g.
Pizza lint, McDonald's, Benetton), and waiting times can be reduced
through synchronizing supply and demand and/or tackling staff
productivity problems. [9]
During the past decade, many service companies have invested heavily to
develop streamlined and efficient service delivery systems. They want to
ensure that customers will receive consistently high-quality service in every
service encounter. Unlike product manufacturers, which can adjust their
machinery and inputs until everything is perfect, service quality will always
vary, depending on the interactions between employees and customers.
Problems will inevitably occur.
Mistakes are a critical part of every service. Hard as they try, even the best
service companies can't prevent the occasional late delivery, burned steak,
or grumpy employee. The fact is, in services, often performed in the
customer's presence, errors are inevitable. While companies cannot always
prevent service problems, they can learn to recover from them when they
occur. Good service recovery can turn angry customers into loyal ones. In
fact, it can win customer purchasing and loyalty and create more good will
than if things had gone well in the first place.
29
The first step is to empower front-line service employees - that is, to give
them the authority, responsibility and incentives to recognize, care about
and tend to customer needs, even going beyond their normal jobs to solve
customer problems. Such empowered employees can act quickly and
effectively to keep service problems from resulting in lost customers.
Studies in well-managed service companies show that they share a number
of common virtues regarding sendee quality. These are summarized below:
30
misfilled daily, and drinking water would be unsafe eight days a
year. Top service companies do not settle merely for “good”
service, they aim for 100 per cent defect-free service,
31
well and derive satisfaction from them - happy satisfied customers yield
happy employees. It has also gone to the extreme of moving into palatial
new headquarters in a wooded country estate in northern Copenhagen - an
absence of air-conditioning or dust-hugging carpets, together with soothing
colours, reflect management's belief that scientific cleaning can help reduce
staff illness. [9]
Rising costs put service firms under great pressure to increase service
productivity. The problem is particularly acute where the service is labour
intensive. Productivity can be improved in several ways:
1. The service providers can train current employees better, or they can
hire new ones, who will work harder or more skillfully for the same
pay,
32
4. Service providers can also increase productivity by designing more
effective services. How-to-quit-smoking clinics and exercise
recommendations may reduce the need for expensive medical services
later on.
33
needs and desires. In some cases, service providers accept reduced
productivity in order to create more service differentiation or quality. [9]
34
4 ISS Strategy
ISS is a large corporation with a clear and bold vision “Lead Facility Services
Globally”. Analysis of this vision reflects a will and goal by the company to
acquire more market share than it already has through continuous growth and
expansion as stated in its web site. It seeks to fulfil its aspiration of being a
world leader in IFS through its core values, which is an integral part of the
vision’s core aimed at describing what the organization represents today and
what its member would like it to represent in the future. [13] It means that core
values of an organization are more about what the organization is rather than
what it does. In theory, core values should be unique to an organization but may
nonetheless be constituent of several elements that are shared with other
organizations. They are the organization’s essential and enduring tenets, not to
be compromised gain or short-term expediency.
Following a study of the company website and other literature from them, we
found the core values of ISS as: [14]
Honesty-we respect,
Entrepreneurship-we act
Responsibility-we care
Quality-we deliver
A firm’s marketing strategy depends on its size and position in the market. A
firm with the largest market share is known as the market leader. With this
knowledge, it can be adduced that ISS is one of the market leaders in its
offerings even though the firm has a strategic goal to increase its market share
35
and lead facility services globally. Currently, it is a major force in the facility
services industry. In 2005, ISS announced the new strategy, Route 101.
Route 101 is a destination plan that describes ISS in terms of service
offerings, organization, geography, etc. The destination described in Route
101 is a Facility Services company with revenue of DKK 101 billion. ISS
plans to put its vision into operation through its Strategy Plan introduced in
spring 2007 called “ISS Strategy Plan 2007-2009”. The Strategy Plan
further details the initiatives needed to fulfil the vision through: [15]
Facility services
Single service excellence
Operational efficiency
Growth
Geography
Organization
Branding
Systems and methodologies
Acquisitions
In a more detailed illustration, below are all ISS strategies and the various
tactics by which it hopes to carry out these strategies.
36
The ISS Strategy
Strategy Tactic
37
Integrated Facility Services (“IFS”). It provides management of
Facility Services through acquisition of service companies in
Germany, Switzerland and the United Kingdom. There is an
implementation team with the primary focus of accelerating the IFS
implementation in selected countries. The team, which consists of
four experienced specialists, has a mission of providing operational
support in winning, bidding, transitioning and operating the first IFS
contract within a country. [15]
38
Operating margin: ISS second objective is to maintain or improve
its operating margin, which increased from 5.7% in 2005 to 5.8% in
2006. It will seek to generate operational efficiencies by increasing
its local market positions and operational densities, as well as
through the implementation of company-wide best practices.
39
planning tools, facility service management systems, etc. have been
developed and will be implemented going forward. [15]
40
2006 through an acquisition. ISS is currently analysing the US
market in preparation for a possible US entry. [15]
41
ISS mergers and acquisitions department manages the acquisition
process, primarily with respect to valuation of the acquisition and
negotiation of the material acquisition agreements, to the extent that
its centralized resources add value. This centralized department is
responsible for quality assurance with respect to all acquisitions and
is a driving force with respect to centralized pipeline management in
the country organizations. The centralized pipeline management
ensures that each subsidiary continues to explore acquisition
opportunities, which would contribute to the achievement of ISS’s
objectives. ISS’s mergers and acquisitions department is more
heavily involved in all larger acquisitions, and the Executive Group
Management of ISS A/S approves all acquisitions. In addition, the
approval of the Board of Directors is required for large or strategic
acquisitions. The most important element of Group involvement is
in the assessment of country readiness for acquisitions as well as
strategic screening and valuation of acquisitions. On a discounted
cash flow basis a total value of the target is estimated by assigning
value to six independent components. [15]
42
and may not automatically work for all companies offering integrated
facilities all over the globe. Several factors like geographical location,
economy, political policies, labour legislations, organization vision, goals
etc could tend to make a strategy or a combination of strategies work better
for an organization than for a similar one with a different goal, vision etc.
However, these strategies tend to give hindsight of what works for ISS.
Using the company financial report for the periods of 2005, 2006 and 2007
as guide (See Appendix), it can be seen that the company has been making
financial gains for the three consecutive years.
ii. Single service excellence: Even though ISS provides multi services to its
customers, it focuses also on single service excellence in its operating
areas. Through this, the company forms a niche or segment for itself. In like
manner, integrated service companies can develop a competitive advantage
43
by being experts in the service solutions they provide. By focusing on their
core services, they can become efficient in delivering those services and
create an image of excellence among their customers.
From the above condensed cash flow data, ISS, earned more cash by its
core activities and services (operating cash flow) and ended with positive
cash flow at the end of the 2 fiscal years. This is a good sign for the
company as it can be said to have maintained profitable financial growth.
However, it also spent a total of DKK 6893 Million for both 2006 and 2007
in its long term investments. Though the company records a total negative
cash flow at the end of these fiscal years, (DKK-192M, for 2006) and
(DKK-820M as at September, 2007 ), it has a potential to generate profit in
the future due to these acquisitions. It has an operating margin of 5.8% in
2006 after paying for a variable cost of running its services like wages,
44
supplies etc. This means that it made 0.057 and 0.058 for every dollar of
sales for the year 2005 and 2006 respectively. Though, it recorded a slight
increase in its operating margin the higher the better for the company.
In all, ISS can derive the following competitive advantage from its
operational efficiency: lower IFS operating cost, fewer unforeseen
complications, enhanced service levels, consistent reliable reporting etc.
Growth: we analyse ISS growth strategy vis a vis its vision of becoming a
world leader in IFS. From its annual report, it can be seen that the company
reported an acquisition growth of 10% (from a total of 63 acquisitions as at
September 2007) compared to organic growth of 6% for the YTD 2007 (as
of September 2007). This indicates that the company has a big focus on
acquisition growth which works for its path toward geographic expansion
which would be difficult if it only focused on organic growth. For example,
on the path to geographic expansion as an organic growth firm: suitable real
estate needs to be located and purchased, a building may need to be
constructed or modified to conform to plans for use, new machinery bought
or built, employees trained, logistics plans implemented, and advertising
developed to attract a new customer base. All of this takes considerable
commitment and time before the expansion can generate cash flows at its
full potential. In contrast, the acquiring firm can purchase an existing set of
similar assets already in operation in the form of another firm and have
immediate access to its cash flows. While the acquisition process itself will
take some negotiation time and some additional time to integrate the target
firm into existing operations, conventional wisdom is that acquisitions are
generally quicker to implement but usually more expensive. [17] This is
evident in the ISS cash flow statement on the amount it spends on
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acquisitions. However, having highlighted the benefit of its acquisitions,
care must be taking to maintain standard and retain value which could
reduce due to acquisitions. ISS successful execution of both organic growth
and growth by acquisition as complementary strategies aligns everyone and
everything in the company around the company’s corporate goals, and so
achieving these goals, faster, better, and cheaper.
In this present day, a company that wants to gain a good market share in its
services and have competitive advantage among its competitors needs to be
corporately responsible. There has been a growing awareness among
customers and other stakeholders and increase demand from them for
companies to be environmentally and socially responsible in their
operations. This has resulted to different standards of measuring success
from the one time of only economic and financial means to a now triple
bottom approach i.e. economic, social and environmental. To move towards
the right direction, an IFS company has to keep up to date with recent
trends in management and environmental standards.
46
trade unions. Total quality management is firmly upheld, staff are trained
so that they can do their jobs well and derive satisfaction from them - happy
satisfied customers yield happy employees and vice versa. From the
literature review, we also find that ISS has also gone to the extreme of
moving into palatial new headquarters in a wooded country estate in
northern Copenhagen - an absence of air-conditioning or dust-hugging
carpets, together with soothing colours, reflect management's belief that
scientific cleaning can help reduce staff illness. [9] These efforts by the
company to provide good and conducive working environments for its
employees show that it practices one of its core values of responsibility-
caring making a corporate social responsible organization.
From our study, we believe that ISS is moving towards the right direction
through employee motivation. However, despite these efforts, we think that
to move towards environmental responsibility, as an IFS company and still
make profits and also achieve the organization vision of becoming the
world leader in IFS; ISS need to do more than just for the employees and
other stakeholders. It needs an Environmental Management Standard like
ISO 14001: 2004
It can be argued that since ISS does not manufacture products, it does not
need to focus on environmental management system. We can state here that
ISO 14001 standard is not only for manufacturing organizations but for
every organizations. The following highlights the reasons we believe that
and ISO 14001 EMS is appropriate for ISS as well as any other IFS
company.
It is the most important environmental standard in the world
47
It is not organization specific i.e. it applies to all organization
whether a manufacturing or service company.
It is supported by environmentalist and encouraged by governments
Since ISS uses various solutions in its operations e.g. cleaning, wash room,
pest control services etc which employees and customers are exposed to, it
(and other IFS companies) needs the standard in the following areas:
Implement, maintain and improve an environmental management
system
Assure itself of its conformance with its own stated environmental
policy (those policy commitment must be made)
Demonstrate conformance
Ensure conformance with environmental laws and regulations
Seek certification of its environmental management system by an
external third party organization [18]
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5 Conclusion and Recommendations
This is the concluding chapter of our thesis which will bring our purpose of
writing this thesis into context. This chapter also aims at providing
recommendations to our case study, ISS, Sweden.
5.1 Conclusion
49
that ISS’s marketing strategies has brought about growth and expansion of
the organization and is helping to propel it towards its vision.
We have to note here that though we recognize that ISS could have
some form of environmental policy, however, since we did not
come across such information in the data we utilized for this study,
we therefore recommendation that efforts should be made towards
obtaining the ISO 14001 Environmental Management Standard
(EMS) certification which specifies the actual requirements for an
environmental management system. It should apply to those
environmental aspects which the organization has control and over
which it can be expected to have influence. This recommendation
applies to all IFS company.
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ISS should research and develop new cleaning solutions that are
free from pollutants, harmless to their employees and improve their
overall environmental performance.
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References
Company Materials:
Other References:
7. Lonier, Terri. 1999. Smart strategies for growing your business. New
York: John Wiley and Sons Inc.
52
8. Hutt, D Michael and T. W Speh.1992. Business Marketing Management:
a strategic view of industrial and organizational markets. 4th Edition.
London: Harcourt Brace Jovanovich College.
11. McDonald, Malcolm. 2002. How come your marketing plans aren’t
working?: The essential guide to marketing planning. London: Kogan Page
Limited.
17. Carol L. Anilowski. Is All Growth Created Equal? The Predictive Value
of Growth Strategy. University of Michigan Stephen M. Ross School of
Business, January 23, 2006.
18. Collins Amanze, Yury Kazhura, Gerald Muchu and Pavan Kumar
Vummadi. Project report: Strategic Management for Radius Company,
January 2005.
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Appendix A
ISS A/S Revenue by service
2004
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2005
55
2006
56
Appendix B
Condensed consolidated interim cash flow statement
These condensed consolidated interim financial statements are unaudited.
1 January – 30 September. Amounts in DKK millions
1
Compared to 2006, Interest paid, net has been reclassified from cash flow from operating activities to cash flow
from financing activities. Comparative figures have been restated accordingly. [16]
57